The 767 was built from the start with a large wing to support the extra fuel tanks. The 787-9 is fully optimised for how it sits right now. Maybe a 10T MTO bump at most which will simply allow more payload when fully fueled.

If an airline can't fill a 777-8 then 787-9ER wouldnt make much difference. The 777 only carries 20% more passengers.

lightsaber wrote:

....
Lightsaber

In the past Boeing seems to have worked some decisions more for appearance than for well founded technical reasons.
.. just to keep the share holder community in "breathless happiness" so to speak.

AFAICS the rate increase changes the lighting to give more shadow to the rather slow rise of recouping deferred cost.
( in real numbers but also in projection.)

it opens up slots but it does not allow for cheap sales on its own.
We will see more Boeing orders, but for political arm twisting reasons. We've seen the first already.

The trick is to force the "proper" attribution of causality into the "public brain".
It has been perfectly worked on Twin vs Quad.

Great news !! Boeing does seem to be on its way out of the woods when it comes to 787 deferred costs, let's see how long that takes. Will Boeing manage to prove those analysts wrong and recover all of its deferred costs earlier than predicted? As some have noted, this could be a sign that a big and promising orders are about to be announced. 787 would most likely end up being the most successfully widebody Boeing has made when it comes to number of sold frames. I hope its accounting books would reflect that success in the long run.

I also agree with those who wonder why A330neo isn't selling at this point as much as expected. On paper, A330neo could be incredibly attractive if it delivers what it promised in terms of CASM performance AND if it sells cheaper than 787. Both conditions have to present in order for A330neo to compete with 787. Which one is missing here? Is it the second condition? the acquisition price? Perhaps the aggressive discounts on the A330ceo are also to be blamed. Just look at how well A330ceo has done ever since A330neo was launched to hazard a guess on how desperately Airbus is trying to bridge all A330ceo production gaps.

In numbers, A330neo has sold almost the same number of frames as 787 since it was first launched in 2014 (787 being slightly more). So the average number of orders per year does not look too bad. However, launch orders could be deceiving, just like what's going on with 77X program. Both OEM would be glad if they manage to sell consistently over the years in smaller numbers than have a surge of orders at launch before it gets quiet for years. Consistency is key. A true test of A330neo would start once all slots of A330ceo are sold.

Stitch wrote:

Plus Boeing Commercial also still publishes their financials in Unit Costs so you can see directly how much money they actually lost or made in a quarter / year. And on a Unit Cost basis, they have been net positive to the tune of billions of dollars on an annual basis since 2015 (and almost so in 2014 with a net loss of only $122 million for the year).

What you reference are the over all numbers.

The unit cost accounting per year numbers are blind to the deferred cost from the past.
( the difference should ~~~~ correspond to what was moved into the deferred bucket
in the same year.)

What we do know about the 787 project is the amount of deferred cost growing/shrinking.
That sum is now shrinking by amounts in the general magnitude of $1..200m. not billions.
We'll have to wait a couple of quarters to make a reasonable projection on what amount
of deferred cost will remain after ...

Revelation wrote:

flee wrote:

kitplane01 wrote:

My gawd I'm sick of seeing this on airliners.net.

The price that maximizes Boeing profit (or minimizes Boeing losses) is independent of the accounting block, and independent of changes to the accounting block. This has been discussed many times on airliners.net. Please see https://en.wikipedia.org/wiki/Sunk_cost

I know what sunk cost is and I agree that there is no effect on cash flows as the money has already been spent.

I also know what Boeing's program accounting involves. All those sunk costs are not written off at the time they are incurred. Instead, they are carried forward as "deferred costs" and capitalised as an asset in Boeing's balance sheet. The asset is then amortised with each 787 frame delivered.

I hope that you now see the big picture!

I'm not sure you see the big picture. The size of the accounting block is determined by the number of aircraft the company is confident it can sell and project a valid cost and return for. It is NOT changed based on their need to "cover all the deferred costs".

Is Boeing projecting a profit or loss for the accounting block?

N14AZ wrote:

Revelation wrote:

Siddar wrote:

The 330 NEO was just an airbus insurance policy in case 350 had the same development problems as 787

Sorry, but this sounds like "revisionist history" to me. I was here on a.net throughout all the discussions as the A330neo was being formulated, and I can't even recall the "insurance policy" idea even being floated, never mind it being given credence.

There are lots of markets/routes where the A330neo makes a lot of sense. I can understand that if it gets launched into a stagnant wide body market and doesn't pick up steam that the financial community might stay away from it, but 3 big leasing firms already have a block of 50 a/c on order and the plane hasn't even entered service yet.

Never heard about the "insurance policy" either. Existing A330-operators (you know, for example the one who always wears a red baseball cap...) pushed Airbus for an updated version and finally Airbus launched it.

Also, the A330neo was launched in July 2014. At that point the A359 was already flying and about 6 months from EIS. Unless there is serious communication issues within Airbus and they had no clue about the actual state of A350 development Airbus already knew at A330neo launch that they did not need an "insurance policy" for the A350.

My opinion, get the 787 out the door faster to reduce the backlog and put the company in a better position to launch a new frame. What we know is that this will thin out the 787-8 backlog much faster even if by upgrades to the 787-9, it avoids cancellations with penalties, allows customers who do not really need the size of the 787-9 to actually take them since they will get them earlier,
Now the other two possibilities is to ramp up 787-10 production the people mover, or in short order have a massive lay off of non-production staff when they launch a new frame, however that would mean that the new frame would have to be based on 787 tech and production facilities.

AC will exercise their 13 options by the end of the year.

A reborn 787-8 (with 787-9/10 improvements) will keep 787 family alive for a long time. Boeing may be thinking an upgraded 787-8 will eat into the 777X sales.

Revelation wrote:

lightsaber wrote:

My point is that increased 787 volume forces the A330NEO to compete more vigorously.

As my above post noted, I think this is an indication Indigo, Spicejet, or both ordered the 787... Or maybe I just hope.

Very interesting thoughts. Time to make some popcorn!

We need popcorn. The last two years of widebody orders (all, not just 787) are counter to this line rate increase.

What does Boeing know we don't?

lightsaber wrote:

Revelation wrote:

lightsaber wrote:

My point is that increased 787 volume forces the A330NEO to compete more vigorously.

As my above post noted, I think this is an indication Indigo, Spicejet, or both ordered the 787... Or maybe I just hope.

Very interesting thoughts. Time to make some popcorn!

We need popcorn. The last two years of widebody orders (all, not just 787) are counter to this line rate increase.

What does Boeing know we don't?

Perhaps there is nothing to know and the rate in crease is to produce more cash in the near future rather than later.

mjoelnir wrote:

Perhaps there is nothing to know and the rate in crease is to produce more cash in the near future rather than later.

Well Boeing can't deliver 787s faster to airlines that don't want them faster so the customers appear ready and willing to accelerate deliveries. And 787 orders are still looking decent in the face of what some analysts have called a "widebody slump".

Overall these look like signs that the 787, could be able to maintain a decent Book to Bill ratio in the coming years despite the "slump" and that Boeing might have the inside track on mid-size widebody RFPs planned for announcement over the coming years.

Between 767-300er and 330-200 there over a 1000 frames in service. Is it not the case that many of these will be replaced in the next 10 years?

Does anyone doubt the 787 will get 90% of the 767 and 70% of the 330's?

I was thinking the -8 would make the perfect ULH but the idea of doing a lighter frame would be ideal for so many routes.

We know one thing for sure. Probablility of Indian LCCs ordering WBs is same as contestants winning Man vs Food challenge.

Same result, either they cannot swallow or throw up.

SpiceJet planes were repoed couple of years back , now devotees are talking about WBs.

Indigo is trying to do too many things same time. Not a good strategy in a country with unhealthy financial system.

Stitch wrote:

mjoelnir wrote:

Perhaps there is nothing to know and the rate in crease is to produce more cash in the near future rather than later.

Well Boeing can't deliver 787s faster to airlines that don't want them faster so the customers appear ready and willing to accelerate deliveries. And 787 orders are still looking decent in the face of what some analysts have called a "widebody slump".

Overall these look like signs that the 787, could be able to maintain a decent Book to Bill ratio in the coming years despite the "slump" and that Boeing might have the inside track on mid-size widebody RFPs planned for announcement over the coming years.

The ramp is going to 160 to 170 B787s per year. Before Boeing gets up to speed, the backlog would be too low to justify the ramp unless there is (are) a significant order(s). Nothing happens fast in aviation. This couldn't only be Boeing's call as vendors will demand information (dang it, my sources aren't talking!).

My thoughts, Boeing wouldn't accelerate production 3 years ago with 230 more 787s in the backlog as there wasn't enough demand. Now Boeing will ramp up production. To me, that means sales. Who?

If we put it in perspective, this will take 787 production to 160 to 170 per year versus 100 to 110 A350s per year for Airbus.
https://leehamnews.com/2017/01/26/asses ... n-futures/

Airbus won't increase A350 production because in 2023 the backlog sharply falls off.

Per that link, A330 sales were to be the focus in 2017. Where are the sales? I'm certain Boeing could spoil A330NEO sales with profitable sales of the 787, but only if the 787 were to be available at the right times.

I'm not buying Boeing is only doing this for 2019/2020 margins as without a near term order, that is all this is. Unless Boeing is thinking incredibly short term, this is to generate slots to sell.

As others pointed out, it could be options. It could be 767 and A330 replacements. But I suspect growth.

dtw2hyd wrote:

We know one thing for sure. Probablility of Indian LCCs ordering WBs is same as contestants winning Man vs Food challenge.

Same result, either they cannot swallow or throw up.

SpiceJet planes were repoed couple of years back , now devotees are talking about WBs.

Indigo is trying to do too many things same time. Not a good strategy in a country with unhealthy financial system.

India is on track to have the fastest aviation growth the next decade. If the LCCs ignore long haul, they ignore a major opportunity.

Searching for orders, I forgot Vistara is considering ordering widebodies. I simply do not think the long haul market from India will be the same a decade from now as it is today.
There is an opportunity there since the ME3 have been caped and Indian aviation's growth is tremendous.

Of course there is risk. But only companies that grow will dominate. Indigo has been interested in AI's long haul. But only if profitable. By now they're gone through the data and come up with a strategy that would involve growth.

http://www.livemint.com/Companies/5x9e9 ... India.html

If you don't think this is Indigo, Spicejet, or Vistara, who do you think is ordering 787s? Boeing wouldn't do this ramp up without significantly more orders.

With 6.5% international traffic growth ready to accelerate, someone needs to be ready to meet that demand:
https://www.trbusiness.com/regional-new ... nue/126614

Lightsaber

So clearing out all 787-8 orders to free up resources for the 787-9 / 10 or possible MOM on 787 tech is not in the cards?
A cost analysis is required, is the ramp up more costly than the lower margins on the 787-8 along with its higher production cost?
However, all this as mentioned also means that customers are willing to take frames sooner rather than later, so do we also factor additional discounts for no deferrals?

I don't think Boeing is trying to clear out 787 orders - it is trying to open up more near term delivery slots. The 787 is going to be their mainstream wide body model because they have realised that the 777-9 is not going to be anywhere as popular as the 777W. So they need the volume in order to generate positive cash flow - and the 787 is most likely to do that.

Furthermore, the 787 is now becoming a "proven aircraft" with proper operating statistics that prospective customers can peruse. The 777-9 is still very much a plane that can only boast of projected numbers as it is yet to fly.

Boeing realised that if they boost production in 2019, they can attract new orders from airlines - and the first to bite was Malaysia Airlines (May 2019 deliveries). Availability is a big issue these days as airlines don't like the long, long lead times between orders and deliveries.

osupoke07 wrote:

Ostrower on Twitter reporting that Boeing to increase production rate to 14, and the accounting block has increased by 100 frames. I don't have a link I can post yet.

AGAIN!? I remember SEC was planning to investigate them on their debt deferral antics. How did that end? And did it happen at all or did they get another not-subsidy-totally-different-from-Bombardier from yet another president?

Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.

Being a publically traded company, is it really for Boeing to decide those things? Just how far are they going to push the "too-big-to-fall" financial strategy? Because it really looks like they have no other one. You can't just defer $32+ billion dollars debts over and over and over again. Every time they add another hundred orders, they defer their debt even more.

BREECH wrote:

osupoke07 wrote:

Ostrower on Twitter reporting that Boeing to increase production rate to 14, and the accounting block has increased by 100 frames. I don't have a link I can post yet.

AGAIN!? I remember SEC was planning to investigate them on their debt deferral antics. How did that end?

Sounds like it never happened - the media reports were based on allegations that the SEC was considering launching an investigation and the SEC appears to have never gone forward with it. A shareholder lawsuit was dropped not long after the alleged investigation after the SEC was said to have reiterated their opinion that Program Accounting was an approved practice.

BREECH wrote:

Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.

Just how far are they going to push the "too-big-to-fall" financial strategy? You can't just defer $32+ billion dollars debts over and over and over again. Every time they add another hundred orders, they defer their debt even more.

It's not a debt. Boeing's already spent the money (the employees don't assemble the 787s for free and the vendors require payment for the materials they provide to allow the employees to do so). They just haven't booked it against their financials yet.

And every time they add another hundred orders, they increase their opportunities to reduce the amount they will eventually need to book against their financials. And it looks like Boeing will keep adding (another hundred) orders for some time to come now.

lightsaber wrote:

Revelation wrote:

lightsaber wrote:

I'm curious if Leeham will point out how devastating this is for the A330NEO. The advantage of short term slots just went away. With only 204 A330NEO + a dwindling A330CEO backlog, there should be concern. Is there even a know active A330NEO sales campaign?

Interesting point. In my view A330NEO does not seem to be a factor in some campaigns I thought it should or might, such as MH. In that case it seems have range for KUL-Europe without restriction is the issue.

The A330NEO should be making news. At least in terms of airlines negotiating in the press.

Something is also up at Boeing. The 787 had far far too long of a backlog at the end of 2013. I posted then into 2016 that Boeing would have to increase production to sell. Now that the backlog has been reduced by about 230 and we're in a widebodies glut. By glut I mean that used widebodies that should be finding 2nd homes are instead going to the desert. The A330NEO has a backlog Airbus could fill in 2 years and one month! You can find older posts of mine noting the A330NEO would struggle, but I posted 300 to 350 orders by this point with RR eventually selling about a thousand T7000. IIRC, I estimated 400 to 600 A330NEO.

Ugh... Over-estimated...

So why is Boeing surging? Vendors will earn penalties if Boeing doesn't sell more 787s. So this implies sales. Who?

Indigo?
SpiceJet?
Turkish?
I'm going to assume Sir Clark of EK didn't misdirect with 'off the table' meaning something else...

Applying a little game theory...
Could Airbus meet the demands of the Indian airlines with the A350? In my opinion no. Late edit:. By demands I mean delivery rate and pricing.
Could the A339 meet their performance demands and need for cheap leasing? Unlikely due to a perceived faster depreciation rate, but not to be ruled out. The A338 hasn't sold as it's CASM wouldn't interest these airlines and the A339 hasn't the range in a high density configuration. Not to mention the A359 and 787-10 just have better CASM.
Would Boeing offer 789s and 787-10s at a price to meet their needs? Yes.

I believe this is due to a SpiceJet or Indigo order, if not both.

Lightsaber

PS, late edit
I believe the poor widebody resale market and shift to the lowest CASM frames is indicative of how brutally competitive long haul is today.

A couple of things on the A330NEO.

Firstly, as we have seen, over the last few years, widebody sales have been in the car park.
signs that this might be the first year that they start to pick up are appearing.
And in that context this move by Boeing makes sense.

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.
The A330-900 should be in service now. It hasn't even flown yet.
Those that argue that one of its biggest selling points is availability should be picking up on this, but aren't? We're that keen to write it off?
I'm not.

I don't get, by the way, why we're having an either-or argument about whether this move is due to sales prospects OR to improve the cash position in the short term. The move will clearly satisfy BOTH requirements.....
So chill, eh? Yes it will be about sales prospects. But yes, it will equally be about accounting.
Both help Boeing, so why argue?

Rgds

My guess of potential 787 orders for delivery in the 2020-2025 period.

10 each - Air Canada
20 each - Air China
10 each - Air Europa
30 each - Air France / KLM
10 each - Air India
30 each - ANA
50 each - American Airlines
10 each - Avianca
20 each - British Airways
20 each - China Eastern
30 each - China Southern
60 each - Delta Airlines
40 each - Emirates
15 each - Hanain Airlines
20 each - Japan Airlines
?? each - Korean Air
25 each - Malaysia Airlines
10 each - Norwegian
25 each - QANTAS
5 each - Royal Air Maroc
30 each - Saudi Airlines
19 each - Singapore Airlines
10 each - Swiss Airlines
10 each - Thai Airways
60 each -United Airlines
5 each - Westjet
30 each - Xiamen Airlines

If we consider the requirement to replace (using a 22 year replacement cycle) 500 767's, 400 A330's, 200 A340's and 500 777-200/300's during the 2020-25 year period the replacement market alone has the potential to sustain this increase in production.

The question for the A330NEO is how much of the replacement market can it capture.

Stitch wrote:

It's not a debt. Boeing's already spent the money (the employees don't assemble the 787s for free and the vendors require payment for the materials they provide to allow the employees to do so). They just haven't booked it against their financials yet.

That's the definition of debt. Money you owe before you pay it back. Where do you think Boeing got the $32 billion to spend on this program?

Another scenario is that there is an unwriiten understanding with EK that they will take the 787 with a reduction or big deferral on their 779s. Just my

lightsaber wrote:

My thoughts, Boeing wouldn't accelerate production 3 years ago with 230 more 787s in the backlog as there wasn't enough demand. Now Boeing will ramp up production. To me, that means sales. Who?

Sales would make sense in some way. However, if (much) more sales were in the cards, why would the accounting block increase be limited to only 100?

travelhound wrote:

My guess of potential 787 orders for delivery in the 2020-2025 period.

10 each - Air Canada
20 each - Air China
10 each - Air Europa
30 each - Air France / KLM
10 each - Air India
30 each - ANA
50 each - American Airlines
10 each - Avianca
20 each - British Airways
20 each - China Eastern
30 each - China Southern
60 each - Delta Airlines
40 each - Emirates
15 each - Hanain Airlines
20 each - Japan Airlines
?? each - Korean Air
25 each - Malaysia Airlines
10 each - Norwegian
25 each - QANTAS
5 each - Royal Air Maroc
30 each - Saudi Airlines
19 each - Singapore Airlines
10 each - Swiss Airlines
10 each - Thai Airways
60 each -United Airlines
5 each - Westjet
30 each - Xiamen Airlines

If we consider the requirement to replace (using a 22 year replacement cycle) 500 767's, 400 A330's, 200 A340's and 500 777-200/300's during the 2020-25 year period the replacement market alone has the potential to sustain this increase in production.

The question for the A330NEO is how much of the replacement market can it capture.

IAG only list 18 787-9s as options, Very difficult to see where they will order 22 more seeing that they already have 43 A350s with 57 options available.

PW100 wrote:

lightsaber wrote:

My thoughts, Boeing wouldn't accelerate production 3 years ago with 230 more 787s in the backlog as there wasn't enough demand. Now Boeing will ramp up production. To me, that means sales. Who?

Sales would make sense in some way. However, if (much) more sales were in the cards, why would the accounting block increase be limited to only 100?

I'd suggest the accounting block is linked to a period of time just as much as it is to a quantity of units delivered. As such, accelerating deliveries would bring the extra 100 aircraft in the revised accounting block into the time period of the previous 1300 accounting block period

lightsaber wrote:

India is on track to have the fastest aviation growth the next decade. If the LCCs ignore long haul, they ignore a major opportunity.

Searching for orders, I forgot Vistara is considering ordering widebodies. I simply do not think the long haul market from India will be the same a decade from now as it is today.
There is an opportunity there since the ME3 have been caped and Indian aviation's growth is tremendous.

Of course there is risk. But only companies that grow will dominate. Indigo has been interested in AI's long haul. But only if profitable. By now they're gone through the data and come up with a strategy that would involve growth.

http://www.livemint.com/Companies/5x9e9 ... India.html

If you don't think this is Indigo, Spicejet, or Vistara, who do you think is ordering 787s? Boeing wouldn't do this ramp up without significantly more orders.

With 6.5% international traffic growth ready to accelerate, someone needs to be ready to meet that demand:
https://www.trbusiness.com/regional-new ... nue/126614

Lightsaber

Most of India's aviation growth will be domestic. International will grow but not at the same rate.

I believe 9W will be next big operator of 787 in India. DL probably doing the math now, my bet they will find replacing 777/A332 will save a lot of money for 9W.

SpiceJet may wet lease couple of 787s for one or two seasons. Long haul will be on 737MAX.
Indigo may settle for A321LR in near future.
Vistara will never see a single WB.

BREECH wrote:

Every time they add another hundred orders, they defer their debt even more.

They spread the recoup out over more frames.
... and there now is no way around to expand the AB when the prospect of sold frames grows.
( once on the deferred project cost drip you are an addict for life

On the smoke and mirrors side: announcing "thinking about an increase in production rate"
when the visible backlog shrinks insinuates a prospect of largish orders in the near to middle future.
.. taking pressure away from questions like : is it realistic to present the amount deferred as
clearable inside the current AB?

BREECH wrote:

Stitch wrote:

It's not a debt. Boeing's already spent the money (the employees don't assemble the 787s for free and the vendors require payment for the materials they provide to allow the employees to do so). They just haven't booked it against their financials yet.

That's the definition of debt. Money you owe before you pay it back.

No, it is not. The accounting definition of debt is: "an amount owed for funds borrowed." Your definition is closer to the definition of a liability, but the deferred costs in the accounting block are not even liabilities. All of the deferred costs in the block have already been paid on a cash basis - they have just not hit the profit/loss yet (i.e. they are now just a paperwork / tax / management bonuses exercise).

BREECH wrote:

Where do you think Boeing got the $32 billion to spend on this program?

The vast majority of it came from their existing cashflows.

speedbored wrote:

The vast majority of it came from their existing cashflows.

Wasn't the excess consumed for showing profits all the time?

Revelation wrote:

Perhaps a true test of A330neo comes when earlier 787 slots are open, meaning the early A330neo wins were in part due to the lack of 787 availability, regardless of its other qualities.

Lack of 787 availability was certainly one aspect of DL's choice for A330neo/A350. I think DL would have went with the Airbus products anyway, but 787 was a non-starter due to lack of availability.

As astuteman has just pointed out, one of A330neos great selling points was/is availability, but the T7000 testing issue has cost it one year of availability.

When was DL's cancelled 787 order supposed to be delivered? Was it really that far from A339 deliveries?

I assumed one of the reasons why DL got A339 was its commonality with A359 and A333, and of course a good deal from Airbus.

BREECH wrote:

Stitch wrote:

It's not a debt. Boeing's already spent the money (the employees don't assemble the 787s for free and the vendors require payment for the materials they provide to allow the employees to do so). They just haven't booked it against their financials yet.

That's the definition of debt. Money you owe before you pay it back. Where do you think Boeing got the $32 billion to spend on this program?

No it is not! The definition of debt is money that is borrowed from a 3rd party and has to be repaid to that party. Boeing was largely, if not completely, able to finance the 787 from internal cash on hand.

WIederling wrote:

speedbored wrote:

The vast majority of it came from their existing cashflows.

Wasn't the excess consumed for showing profits all the time?

Not exactly. There is a difference between cash flow and profit/loss. In theory, long term average over many years of the two should even out to the same. However, there are some distortions in accounting and tax rules that prevent that. As an example: The business I own shows a difference each year to my benefit between cash flow and profit/loss because I use the standard mileage deduction and not exact cost on my vehicle use (and much of my vehicle use is business related). The IRS sets the mileage rate based on several averages - and accepts this simplification and the resulting effect on difference between cash flow and profit/loss as it's just not worth the time and effort to make it right for every case.

I chose to operate a vehicle for my business that works to my favor in this area. Others may chose a vehicle that works against them in this area for legitimate reasons. There are other cases like that - and some businesses work to maximize the differences allowed by the accounting and tax laws to their favor. Others do not care about that.

It is quite possible for Boeing to work the factors so they could have higher cash flow than their taxable profit shows. While ultimately this cash shows up somewhere in the books... it may not be obvious where it went without extremely close monitoring and tracking of the internal books - which is something not released in quarterly or annual reports. So, it is plausible that Boeing was able to fund at least part of the 787 via such hidden money (and perhaps they did not).

Have a great day,

travelhound wrote:

I'd suggest the accounting block is linked to a period of time just as much as it is to a quantity of units delivered. As such, accelerating deliveries would bring the extra 100 aircraft in the revised accounting block into the time period of the previous 1300 accounting block period

The Accounting Quantity is generally a ten-year projection of sales, not deliveries, so this would be the number of frames Boeing expects to sell through 2027. With almost 1300 orders already secured, that projection is quite pessimistic, but as annual orders start to shrink compared to the early days of the program, Boeing probably feels it is prudent to be more conservative with their boosts and they can always raise it later as the order book warrants (it has been almost four years since the boost to 1300, which was two years after setting it initially at 1100).

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.
The A330-900 should be in service now. It hasn't even flown yet.
Those that argue that one of its biggest selling points is availability should be picking up on this, but aren't? We're that keen to write it off?
I'm not.

Lets not exaggerate the A330neo's delays. It hasn't been delayed a year+, it has been delayed ~3-4 months. It was never suppose to be in service right now. Its original schedule was first flight in late Spring and first delivery at end of the year. Right now first delivery is planned for March 2018 assuming no issues during flight testing.

astuteman wrote:

A couple of things on the A330NEO.

Firstly, as we have seen, over the last few years, widebody sales have been in the car park.
signs that this might be the first year that they start to pick up are appearing.
And in that context this move by Boeing makes sense.

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.
The A330-900 should be in service now. It hasn't even flown yet.
Those that argue that one of its biggest selling points is availability should be picking up on this, but aren't? We're that keen to write it off?
I'm not.

I don't get, by the way, why we're having an either-or argument about whether this move is due to sales prospects OR to improve the cash position in the short term. The move will clearly satisfy BOTH requirements.....
So chill, eh? Yes it will be about sales prospects. But yes, it will equally be about accounting.
Both help Boeing, so why argue?

Rgds

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

I think that one of the reasons behind Boeing's production rate hike is to open up slots, giving potential 330neo customers a practical option, should they want their aircraft sooner, than later. Boeing wants to delay the 330neo getting a toehold and if pushing their suppliers a bit hurts the guys across the pond, they will go for it.

I mean, look how hard they are fighting BBD...not even a competitor in any real sense. They are willing to risk other multi billion dollar deals, on a fight with a company, (and country), that might not ever produce a true competitor to any of their products.

It seems to me that this is a pretty simple strategic move, in comparison.

A production rate increase also makes the share price look good...which doesn't hurt right now since they just partly funded a huge, (20 billion dollar), pension fund deficit with shares, not cash.

Polot wrote:

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.
The A330-900 should be in service now. It hasn't even flown yet.
Those that argue that one of its biggest selling points is availability should be picking up on this, but aren't? We're that keen to write it off?
I'm not.

Lets not exaggerate the A330neo's delays. It hasn't been delayed a year+, it has been delayed ~3-4 months. It was never suppose to be in service right now. Its original schedule was first flight in late Spring and first delivery at end of the year. Right now first delivery is planned for March 2018 assuming no issues during flight testing.

If we're not to exaggerate the A330neo's delays, then perhaps we shouldn't downplay them either?

TAP now say June/July at the earliest and possibly later into Q3

https://www.flightglobal.com/news/artic ... to-437522/

TAP Portugal is expecting delivery of the Airbus A330neo at the end of the first half of 2018, but indicates it could slip to the third quarter.

That's a minimum of 6 months and possibly up to 9. We'll have to wait and see if the damage is limited to that..

JoeCanuck wrote:

astuteman wrote:

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

I don't think the fat lady has sung yet either. I haven't seen this one posted..

https://www.bloomberg.com/news/articles ... eing-order

Malaysia Airlines Bhd. remains keen on Airbus SE’s upgraded A330neo wide-body jet after placing an order for the rival Boeing Co. 787.

“I think the A330neo will be a super plane, and we are still very much talking with Airbus,” the CEO said by telephone, adding that he plans to meet with the Toulouse, France-based manufacturer toward the end of next week for further discussions.

Bellew said in June that he was seeking a better price for the A330neo and clarity on other aspects of a deal including delivery schedules, adding that an order could take until this month at least.
Talks are continuing on the sourcing of second-hand A330s to fulfill Malaysian’s near-term fleet requirements, with several high-specification examples available on attractive terms from a bankrupt European airline, according to Bellew, who said he plans to meet with the leasing company involved, among others, in Dublin today.
The CEO has said his airline needs up to a dozen current-generation A330s, with half of the planes required in the first half of next year and the rest in 2019.

Sounds to me like he is still very keen on A330 NEO's, but has concerns over the delivery schedule

Rgds

astuteman wrote:

Polot wrote:

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.
The A330-900 should be in service now. It hasn't even flown yet.
Those that argue that one of its biggest selling points is availability should be picking up on this, but aren't? We're that keen to write it off?
I'm not.

Lets not exaggerate the A330neo's delays. It hasn't been delayed a year+, it has been delayed ~3-4 months. It was never suppose to be in service right now. Its original schedule was first flight in late Spring and first delivery at end of the year. Right now first delivery is planned for March 2018 assuming no issues during flight testing.

If we're not to exaggerate the A330neo's delays, then perhaps we shouldn't downplay them either?

TAP now say June/July at the earliest and possibly later into Q3

https://www.flightglobal.com/news/artic ... to-437522/

TAP Portugal is expecting delivery of the Airbus A330neo at the end of the first half of 2018, but indicates it could slip to the third quarter.

That's a minimum of 6 months and possibly up to 9. We'll have to wait and see if the damage is limited to that..

JoeCanuck wrote:

astuteman wrote:

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

I don't think the fat lady has sung yet either. I haven't seen this one posted..

https://www.bloomberg.com/news/articles ... eing-order

Malaysia Airlines Bhd. remains keen on Airbus SE’s upgraded A330neo wide-body jet after placing an order for the rival Boeing Co. 787.

“I think the A330neo will be a super plane, and we are still very much talking with Airbus,” the CEO said by telephone, adding that he plans to meet with the Toulouse, France-based manufacturer toward the end of next week for further discussions.

Bellew said in June that he was seeking a better price for the A330neo and clarity on other aspects of a deal including delivery schedules, adding that an order could take until this month at least.
Talks are continuing on the sourcing of second-hand A330s to fulfill Malaysian’s near-term fleet requirements, with several high-specification examples available on attractive terms from a bankrupt European airline, according to Bellew, who said he plans to meet with the leasing company involved, among others, in Dublin today.
The CEO has said his airline needs up to a dozen current-generation A330s, with half of the planes required in the first half of next year and the rest in 2019.

Sounds to me like he is still very keen on A330 NEO's, but has concerns over the delivery schedule

Rgds

Astuteman, excellent summary. It could be the increase is to gain more MH sales and stall the A330NEO. That could be what Boeing is going after. Shifting Airframes around might meet 2018 demand and this ramp the 2019 demand.

Keeping a competitor from gaining ground is valuable, as that insures future sales.

But we hear also noise from India... Is the noise real?

Lightsaber

BREECH wrote:

Stitch wrote:

It's not a debt. Boeing's already spent the money (the employees don't assemble the 787s for free and the vendors require payment for the materials they provide to allow the employees to do so). They just haven't booked it against their financials yet.

That's the definition of debt. Money you owe before you pay it back. Where do you think Boeing got the $32 billion to spend on this program?

It's important to remember people who make comments like this so that we know who to totally exclude from any future financial discussion on the grounds they have zero idea what they are talking about.

If Boeing were to charge off the whole deferred balance of the 787 program it really wouldn't impact the fundamental health of the company because it wouldn't have an impact on their cash position nor would they owe anyone money.

Stock price isn't everything but the big institutional investors wouldn't be buying as they have if they didn't fully understand the risk and situation. But I am sure they have something to learn from people on the internet...

Boeing wasn't bailed out. I would have been fine letting both the big banks and th auto companies go down and be liquidated.

Characterizing the block accounting deferred cost as anything similar is silly. The cash accounts have already been debited. There is no secret debt. In fact Boeing is very lightly leveraged when it comes to assets vs debt compared to most companies that exist. People are actually suggesting they take on more debt and use it to buy back more shares of stock (which I think would be silly).

The balance sheet is the measure of health for any company really. Boeing is very healthy, people scare mongering over the 787 don't really have any idea what they are talking about. Hence the statement on stock price. The risk is we'll know and evaluated by analyst.

The companies that went down in 2007-8 were either known weaklings who were highly leveraged (auto and airlines) and not producing strong cash flow or had balance sheets no one understood (banks). Boeing is well understood.

I am likely with you on the big banks. What they did was criminal and still not fixed really. But Boeing isn't doing that. Their statements would be familiar to anyone who finances big time manufacturing companies.

In short, what is happening is that Boeing bet that airlines prefer the "point to point" model of long-range flights has worked in Boeing's favor. Small wonder why Norwegian Air Shuttle has become a viable player on many long routes, and proved you don't need an airliner the size of the 777-200ER or A350XWB-900 to fly long routes profitably.

WIederling wrote:

speedbored wrote:

The vast majority of it came from their existing cashflows.

Wasn't the excess consumed for showing profits all the time?

Well the whole point of program accounting is to avoid the high initial production costs from adversely affecting the P&L, causing the company to show a loss (or low profits) during the early life of a program.

Many analysts are of the opinion that Boeing are abusing the method by extending it much too far into the life of their programs, and using it to hide program management screw-ups, but they do not appear to be breaking any rules. My personal opinion is that Boeing are pushing the boundaries as much as they are in order to maximise the benefit from their time-limited tax breaks - which seems very sensible to me.

RayChuang wrote:

In short, what is happening is that Boeing bet that airlines prefer the "point to point" model of long-range flights has worked in Boeing's favor. Small wonder why Norwegian Air Shuttle has become a viable player on many long routes, and proved you don't need an airliner the size of the 777-200ER or A350XWB-900 to fly long routes profitably.

While it is true that the 787 has allowed airlines to open up many new routes, the facts really do not support the view that airlines are switching to a preference of P2P flying. If you look at the IATA annual reports, you will see that the rate of growth of unique city pairs served has remained pretty constant for many years, in-line with the general growth in air traffic. If anything, the rate of growth of unique city pairs has actually slowed very slightly since 787 EIS: http://www.iata.org/publications/Docume ... w-2017.pdf

What the data shows is that the new generation widebodies have simply allowed the industry to continue to grow exactly as it has been doing for very many years.

I think here is very much misunderstanding about Boeing financials overall, including their balance sheet and deferred costs considering 787-program. Deferred cost represent 33% of Boeing's total assets, meanwhile their equity is gone under water 2000 million$. During last years Boeing liabilities has increased tens of thousands millions and same time Company use huge amount of money to dividends and share buybacks. This is not big problem, if production ramp-up with 787-10, 737MAX and future 777X goes smoothly. But Boeing balance sheet is so weak, that it has to stay profitable coming years. Their directors has used huge sum company's money to push up stock price and own bonuses.

JoeCanuck wrote:

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

Me too.

There is no doubt that the 787 rate increase will make it a little harder for the 330neo to compete on availability, but Airbus do have the advantage of not having to cover many millions of deferred costs with each sale. So Airbus will, for quite a few years, have the ability to offset inferior operating costs, on some missions, by offering lower acquisition costs.

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.

Yes. I get the feeling that Airbus are currently not pushing particularly hard for near-term 330neo sales as they are being cautious about their ability to ramp up production according to plan. I fully expect this situation to change once deliveries start.

speedbored wrote:

JoeCanuck wrote:

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

Me too.

There is no doubt that the 787 rate increase will make it a little harder for the 330neo to compete on availability, but Airbus do have the advantage of not having to cover many millions of deferred costs with each sale. So Airbus will, for quite a few years, have the ability to offset inferior operating costs, on some missions, by offering lower acquisition costs.

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.

Yes. I get the feeling that Airbus are currently not pushing particularly hard for near-term 330neo sales as they are being cautious about their ability to ramp up production according to plan. I fully expect this situation to change once deliveries start.

I am not sure if many people here realise that Airbus' A330Neo fortunes are quite closely tied to the B787 - the Trent 7000 is just a bleed air version of the Trent 1000 TEN. So any performance and efficiency differences between the two aircraft should not be that large. Yes, Airbus is focussing on getting the A350 and A320Neo problems solved right now and have let the A330Neo programme fly on autopilot. I am sure that once the test flights begin, and the data flows, they will renew their sales attack on the market.

'The number of unique city-pair connections exceeded 18,400 in 2016, over 700 more than in 2015 and almost double the connectivity by air 20 years ago.'IATA
Re IATA.Above a quote from the doc.Obviously it cannot quote the further P2P/H2P developments in the last 9 months.
Personally I do think it is happening and there is no reason to suggest it won't accelerate.Aircraft such as the 787 (particularly),the 350 and yes the A321NEO are (IMHO) exactly the right aircraft to develop this trend.
Other than the obvious (clearly customers prefer direct flights) it is a unique combination of events that is probably driving this.
These new aircraft are 20%+ more efficient,fuel prices have halved and the new aircraft have (for their size) unparalleled range.
Go back 20+ years and you 'had' to use a 744 to reach many destinations!
Of course hub n spoke is not over by a long chalk but I don't see much further growth there long term.Indeed the recent shift by a couple of majors from 350-1000's to 900's may be part of this - along with a load of 'parked' new A380's.But perhaps that's an over interpretation.

flee wrote:

speedbored wrote:

JoeCanuck wrote:

I agree. It's way too early to write off the 330neo. In my opinion, the 339 is going to be a great seller. One thing it does for sure, is keep 787 prices in check.

Me too.

There is no doubt that the 787 rate increase will make it a little harder for the 330neo to compete on availability, but Airbus do have the advantage of not having to cover many millions of deferred costs with each sale. So Airbus will, for quite a few years, have the ability to offset inferior operating costs, on some missions, by offering lower acquisition costs.

astuteman wrote:

But let's not forget that the A330NEO programme itself has sailed into headwinds on the execution front, specifically with delays of a year+ in the Trent 7000.

Yes. I get the feeling that Airbus are currently not pushing particularly hard for near-term 330neo sales as they are being cautious about their ability to ramp up production according to plan. I fully expect this situation to change once deliveries start.

I am not sure if many people here realise that Airbus' A330Neo fortunes are quite closely tied to the B787 - the Trent 7000 is just a bleed air version of the Trent 1000 TEN. So any performance and efficiency differences between the two aircraft should not be that large. Yes, Airbus is focussing on getting the A350 and A320Neo problems solved right now and have let the A330Neo programme fly on autopilot. I am sure that once the test flights begin, and the data flows, they will renew their sales attack on the market.

One of the key selling points of the A330neo was supposed to be availability, so their sales team has some momentum from that. Higher 787 production rates will limit this advantage for the A330neo. With the current high production rates, production slots are constantly moving around for airlines wanting to accelerate or slow deliveries. Westjet was able to secure doors within 24 months for their 787 order.